Concerns about the serious repercussions of the current confrontation between the United States and Iran on the global economy will not recede. This confrontation, even in its "quiet political" contexts—if such exist—keeps the state of this economy as it is. The damage it has sustained will not end quickly, and the effects it leaves will hinder its movement in all fields, leaving growth under threat.

The economic damage of the confrontation is not limited to supply chains and energy supply shortages, but includes primarily the trajectory the global economy was on in the past few years, where it was genuinely recovering from a series of disruptions that dominated it at the beginning of this decade, foremost among them the COVID-19 pandemic, the explosion, spread, and consequences of which most economies are still paying for.

The greatest fear for the global economy today, resulting from the US-Israeli-Iranian confrontation and the failure to reach a stopping point, is constraining growth at minimum levels and maintaining inflation rates at upper limits. This situation actually emerged after almost all economies in the world succeeded in their long struggle with high consumption costs, which in some countries reached above 15% at one point.

The current situation has, of course, prevented all central banks, including the US Federal Reserve, from taking a necessary reduction in interest rates at this particular stage, in order to give a boost to growth, which the forecasts of all major global economic institutions agree will decline this year and for at least the next two years.

The International Monetary Fund lowered its growth forecast for the current year to 3%, after it was around 3.1%, and there are no guarantees it will remain at this level in the remaining months of this year, especially given the continued stalling of negotiations between the parties of the aforementioned military confrontation. Despite signals of possible growth recovery next year, even if it does happen, it will be less than what the global economy needs in the remaining years of this decade.

In short, threats targeting growth will be present in the coming period, as will inflation, which will remain at best above the target level of 2%, not forgetting that the trajectory until the beginning of this year was moving towards a decline in inflation, which has pressured governments here and there for several years.

There is no room here for raising growth or lowering inflation, and there appears to be no space for financial legislators in the world to move towards lowering interest rates in the remaining months of this year. Even the US Federal Reserve, now under the leadership of Kevin Warsh, a big loyalist of President Donald Trump, could not fulfill the latter's desire to lower borrowing costs in its latest review.

As long as threats continue in the Middle East, there will be no global economic calm, which the world needs to recover from the disruptions of the past and current phases.

* Source: 'Al-Eqtisadiah' newspaper

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